The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea as tensions in East Asia remain high, officials from the two allies said on Thursday.

NSW power sell-off plan gains momentum

The Baird government's bid to partially sell off NSW's poles and wires is gaining momentum with the Productivity Commission calling for state governments to continue privatising their assets.

In its latest report, the commission recommends state and territory governments unload their electricity generation, network and retail businesses to the private sector.

"Governments have successfully privatised airports, major ports and electricity infrastructure and services," the report says.

"The commission is recommending that states proceed with the sale of any remaining assets of these types, subject to good sale processes including a sound regulatory framework."

NSW Premier Mike Baird is proposing to sell 49 per cent of the state's electricity distribution network - commonly referred to as the `poles and wires' - and invest the $20 billion that is expected to be raised through the transaction into infrastructure projects.

The Productivity Commission report comes a week after Australian Energy Regulator chairman Andrew Reeves appeared to back the idea of electricity privatisation in NSW.

"What we have seen is that the productivity of the privately owned businesses appears to be much better than the productivity of government-owned businesses," he told reporters in Sydney when asked whether prices would fall for consumers if the assets were privatised in NSW.

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"That is a factor in the lower prices in Victoria (where electricity assets have been sold off) compared to the prices in NSW and Queensland."

The Productivity Commission says privatisation should only proceed after a scoping study proves it would lead to net benefits in the form of efficiency gains and that the money raised should be reinvested into infrastructure.

NSW Labor is opposed to electricity privatisation, saying it would lead to higher prices for consumers in the long run.

Speaking at a business conference in Sydney, Mr Baird said the government would "fight" to win support for its privatisation bid at the March election.

But he warned the opportunity to sell the assets might be lost if it wasn't supported by the electorate.

"Everyone knows in the market these windows shut," he said.

"We need to win a mandate to secure it.

"But if we do, we're ready to go because we know these conditions might not last forever."